The head of the International Energy Agency said Monday that at least 40 critical energy assets across nine countries in the Middle East have been “severely or very severely damaged” – threatening to keep oil prices higher for longer even if the war in Iran ends soon.
Speaking at the National Press Club in Australia, IEA Executive Director Fatih Birol said it would take time to repair damages incurred at oil and gas fields, refineries and pipelines since the war broke out on Feb. 28.
That could keep oil prices – which at one point reached nearly $120 a barrel during the conflict – elevated even if the war ends within the next couple of weeks, since energy infrastructure is particularly complex and operators will wait to send in workers until it is safe.
As the war enters its fourth week, the world is already facing the worst-ever energy supply disruption as Iran maintains its blockade of the Strait of Hormuz, a vital maritime route for 20% of the world’s oil supply.
Damage to Qatar’s Las Raffan plant, which supplies a fifth of the world’s liquefied natural gas, used for electricity, heating and cooking, has also disrupted the supply of LNG in what some analysts are calling an “Armageddon” situation.
The IEA has started urging households to work from home, carpool and fly less often to combat soaring oil prices, and approved a historic release of 400 million barrels of oil from its reserves.
The supply shock from the war in Iran is already equivalent to the major oil crises of the 1970s and the 2022 gas shortages “put together,” Birol said Monday.
“And, if I may, not only oil and gas,” Birol added. “Some of the vital arteries of the global economy, such as petrochemicals, such as fertilizers, such as sulfur, such as helium. Their trade is all interrupted, which would have serious consequences for the global economy.”
Oil prices eased below $100 a barrel Monday morning after President Trump ordered a five-day pause on plans to strike Iranian power plants following what he called “productive” talks with Tehran.
The president had escalated tensions over the weekend with a 48-hour deadline for Iran to open the strait, but Iran vowed to retaliate on any attacks on its plants with strikes on US infrastructure.
But there have already been enough attacks on energy facilities in Iran, Qatar and Saudi Arabia, as well as attacks on oil tankers in the Persian Gulf, to prolong supply disruptions.
Birol said Monday that the IEA is prepared to issue another emergency release of oil, if needed – though there are not enough oil reserves in the world to completely make up for the missing supply.
“If it is necessary, of course, we will do it,” Birol said.
He added that Asia will be the hardest hit by supply disruptions. Analysts have said even higher prices could eventually ripple across global economies, including the US, in about two months.
In the meantime, higher gasoline prices at home – which typically lag behind oil benchmarks by a couple weeks – could crush the transportation sector and keep prices higher on virtually everything that is transported via truck, including food, clothing and furniture.
On Monday, national average gasoline prices hit $3.96 a gallon and diesel surged to $5.29, according to AAA.
